Indian producers are seeing a sudden spurt in enquiries for prompt pellet cargoes, as Russia entered its second day of war with Ukraine.
Most of the enquiries are emerging from European buyers and they are mainly eying March shipments.
“Enquiries have shown a marked increase from Europe although not many of these have been converted into deals,” informed a market source.
However, trade sources are upbeat that these inquiries will mature into actual deals next week and at much higher prices compared to the current levels reigning in India.
Indian pellet export offers, which showed an uptrend in early February, were in bear territory since the last fortnight on account of a steep fall in spot iron ore prices in China, on cue from dipping futures. SteelMint’s pellet export index price touched $156/tonne on 16 Feb’22.
Meanwhile, Chinese iron ore and pellet prices had been downtrending as production curbs were kept in place till the Winter Games. Iron ore prices fell today, but trade sources inform that more clarity on short-term price movements from China will emerge soon.
Meanwhile, rapid emergency developments are further restricting supply from the war-ravaged region. Ferrexpo, the world’s third-largest exporter of high-grade pellets, in a further announcement said export activities at the port of Pivdennyi, located in southwest Ukraine, where the Group’s berth is located for shipping pellets to customers, have been temporarily suspended following notification from the port authorities. As a result, the Group’s marketing department has issued force majeure notices to certain customers that were due to receive the Group’s products via oceangoing vessel in the near term.
Russia-Ukraine key suppliers to EU
Both Russia and Ukraine supplied a substantial volume of pellets to the European Union (EU). In fact, data maintained with SteelMint reveals that both nations combined had more than a 29-mnt exports exposure. Ukraine supplied a substantial 16.03 mnt of pellets and concentrate in 2021, up nearly 4% against 15.44 mnt in 2020. Russia’s pellet and concentrate exports, however, showed a 10% drop to 13.39 mnt last calendar against 14.88 mnt in the preceding year.
Data also reveals that the EU was the second-largest buyer of Russia’s 12 mnt scrap and metallics export sales last year with volumes at 2.2 mnt while Turkey led with 2.7 mnt.
The supply of this entire volume may get disrupted as Russia continues military operations against Ukraine. “Mills in Europe are desperate to secure cargoes and therefore looking at the Indian pellet export offers,” said a trading source, adding that this is understandable against the backdrop of the present uncertainty.
“The desperation to secure cargo is high with many buyers in Europe,” corroborated another source.
Sources indicate that because of the war, it would not be possible to open letters of credit (LC) when procuring Russian materials and thus many customers are refraining from their import contracts with both countries.
Outlook
There are apprehensions that, if the uncertainty persists for a longer period, many steel mills in Europe, starved of raw material feed, may need to close down temporarily. Therefore, the urgency to secure pellets cargoes is growing, especially since global scrap prices, already high, may head further north.
“There is a bit of panic buying from everywhere.. It seems disruptions/sanctions will cause lots of changes in trade flows, which mean good prospects for Indian pellet exports,” said a trade source.
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